EchoStar has entered into a significant agreement with MDA Space for the construction of low Earth orbit (LEO) satellites, aimed at enhancing its direct-to-device (D2D) satellite constellation. The contract, valued at $1.3 billion, involves the design, manufacturing, and testing of over 100 software-defined satellites. Despite this promising development, analysts express concern regarding the company’s financial future as it grapples with bankruptcy uncertainty.
The deal outlines a plan for an initial configuration of 200 satellites, with the potential for expansion to thousands based on demand. EchoStar anticipates delivery of these satellites by 2028, with commercial services expected to commence in 2029. The total investment for the LEO constellation is projected to reach $5 billion.
During a recent earnings call for the second quarter ending June 30, 2023, EchoStar’s CEO, Hamid Akhavan, noted that the wideband LEO constellation would be self-funded. He emphasized that the new service would complement existing terrestrial offerings in areas lacking connectivity. Akhavan stated that the D2D service could potentially eliminate the need for operators to build or replace cellular towers.
EchoStar’s approach aims to distinguish itself in a competitive market. While T-Mobile and Starlink, along with Apple’s partnership with Globalstar, already provide satellite-based SOS and messaging services, EchoStar plans to offer voice, text, and video services globally through standard 5G NTN handheld devices. “Our product will be indistinguishable from what you already have on your iPhone or your Android phone,” Akhavan remarked, describing the service as a fundamental improvement over current satellite messaging technologies.
Looking ahead, Akhavan indicated that while the service would be available to operators worldwide, EchoStar has not yet ruled out direct-to-consumer offerings. More detailed information regarding this new service is expected to be shared at the upcoming World Space Business Week event in Paris.
In a challenging financial landscape, EchoStar resumed bond payments, including interest on defaulted amounts, on August 1, 2023. The company disclosed in a filing with the US Securities and Exchange Commission that it is actively seeking additional capital, although it warned of significant uncertainties regarding its financial viability. “Substantial doubt exists about our ability to continue as a going concern,” EchoStar stated.
Analysts, including Craig Moffett, senior managing director at MoffettNathanson, have long contended that EchoStar is on a trajectory toward bankruptcy. Moffett highlighted that the company is “still headed to liquidation, whether that’s in or out of bankruptcy.”
The situation is further complicated by scrutiny from the Federal Communications Commission (FCC) regarding EchoStar’s 5G network expansion and its AWS-4 spectrum licenses. SpaceX, owned by Elon Musk, has been advocating for access to the AWS-4 spectrum, which operates in the 2GHz band. Reports indicate that FCC Chair Brendan Carr has urged EchoStar to consider selling its AWS-4 band, a move that could significantly impact the company’s future.
Despite the pressure, EchoStar remains authorized to provide mobile satellite services over its AWS-4 spectrum, which supports its plan to launch the LEO constellation. Akhavan noted that the expansion of the 5G network is currently on hold until a resolution is reached with the FCC.
In terms of financial performance, EchoStar reported a net loss of $306 million for the second quarter, compared to a loss of $205 million during the same period in the previous year. However, the company added 212,000 wireless subscribers in the quarter, marking a notable turnaround from a loss of 16,000 subscribers in the prior year. The total number of subscribers now stands at 7.4 million, with a churn rate of 2.69 percent, an improvement of 24 basis points. Wireless revenue reached $935 million, reflecting a 4.7 percent increase, while total revenue declined by 5.8 percent to $3.7 billion.
As EchoStar navigates these turbulent waters, the coming months will be crucial in determining its ability to launch its ambitious satellite constellation and secure its financial future. The outcomes of ongoing discussions with funding sources and regulatory bodies will play a vital role in shaping the company’s direction.